DAILY MORNING NOTE | 7 March 2024

Trade of the Day

Dyna-Mac Holdings Ltd (SGX: NO4)

Analyst: Zane Aw

(Current Price: S$0.310) – TECHNICAL BUY
Buy price: S$0.310 Stop loss: S$0.290 (-6.45%)
Take profit 1: S$0.345 (+11.29%) Take profit 2: S$0.375 (+20.97%)

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Trades Initiated in the past week

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Singapore shares ended higher on Wednesday (Mar 6), amid mixed trading in the region. Singapore stocks increased 0.9 per cent or 29.04 points to 3,136.14. Across the broader market, gainers outnumbered losers 368 to 232, after 1.5 billion securities worth S$1.2 billion changed hands. The Nikkei 225 lost 0.02 per cent, the Kospi Composite Index fell 0.3 per cent, the FTSE Bursa Malaysia KLCI was down 0.4 per cent, while the Hang Seng Index gained 1.7 per cent.

Wall Street stocks regained some ground on Wednesday while traders kept watch on the congressional testimony of Federal Reserve Chair Jerome Powell. The Dow Jones Industrial Average rose 0.2 per cent to 38,661.05, while the broad-based S&P 500 Index jumped 0.5 per cent to 5,104.76. The tech-rich Nasdaq Composite Index gained 0.6 per cent to close at 16,031.54.

Top gainers & losers

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Events Of The Week

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SG

Wing Tai Holdings has established a S$1 billion multicurrency debt issuance programme. The property developer and fashion retailer on Wednesday (Mar 6) said it plans to use the net proceeds for general working capital and investments, as well as refinancing existing borrowings. It may issue perpetual securities and notes denominated in Singapore dollars or any other currency, in various amounts and tenors, at fixed, floating, variable or hybrid interest rates. They may also not bear any interest. The debt issuance programme has obtained in-principle approval from the Singapore Exchange. HSBC is the arranger and dealer of the facility. Wing Tai shares were 0.7 per cent higher at S$1.41 at market close on Wednesday, before the announcement.

Digital Core Reit has agreed to raise its stake in a data centre in Germany by 24.9 per cent to 49.9 per cent. However, the proposed 117 million euro (S$170.7 million) interested-person transaction requires unitholders’ approval. Digital Core Reit Management, the manager of the pure-play data centre real estate investment trust, said in a regulatory filing on Wednesday (Mar 6) that raising the stake in the freehold data centre in Frankfurt is expected to be approximately 3.2 per cent accretive to the annual distribution per unit. The manager intends to fund the total acquisition cost with proceeds from the sale of the Silicon Valley properties and a portion of the proceeds from the private placement in February. At the time, the manager launched a private placement of new units at US$0.625 apiece to institutional, accredited and other investors, raising US$117 million in net proceeds.

The recent request by a minority shareholder of Great Eastern Holdings to table resolutions at its upcoming annual general meeting (AGM) “does not satisfy all of the requirements” for a requisition to be moved, the insurer said on Wednesday (Mar 6). The Business Times reported on Mar 1 that a group of minority shareholders of GEH, led by independent investor Ong Chin Woo, had sought to table three resolutions at the upcoming AGM: to withhold directors’ fees, to change the share option schemes of employees, and to appoint an independent financial adviser to explore options to enhance shareholders’ value. In its regulatory filing on Wednesday, GEH said it responded to “a minority shareholder, acting on behalf of a group of minority shareholders” after seeking legal advice.


US

Oil prices edged up about 1 per cent on Wednesday on a smaller-than-expected build in US crude inventories, a big withdrawal from distillate and petrol stocks and remarks by the US Federal Reserve chief that he still expects interest rate cuts this year. Lower interest rates could increase oil demand by boosting economic growth. Brent futures rose 92 cents, or 1.1 per cent, to settle at US$82.96 a barrel, while US crude rose 98 cents, or 1.3 per cent, to settle at US$79.13. That put Brent up for the first time in five days. The US Energy Information Administration (EIA) said energy firms added a smaller-than-expected 1.4 million barrels of crude into stockpiles during the week ended March 1, while distillate and petrol inventories fell by much more than expected.

Foot Locker pushed back a plan to expand its sales to US$9.5 billion by two years after a sluggish 2023. The projection, unveiled a year ago, is expected to be achieved by 2028, the company said. The strategy involves diversifying brand offerings, opening new store formats and bolstering loyalty programmes. The retailer posted about US$8.2 billion in annual sales in the fiscal year ended Feb 3, down nearly 7 per cent from the prior period. The retailer predicted adjusted earnings of US$1.50 to US$1.70 a share for this fiscal year, falling short of analysts’ expectations. The shares fell as much as 24 per cent on Wednesday (Mar 6).

Ryde has listed on the New York Stock Exchange (NYSE) under the ticker symbol “RYDE”. The Singapore ride-hailing and carpooling company priced its initial public offering (IPO) at US$4 ($5.35), which is at the lower end of its initial range of US$4 to US$5. On opening day, shares in Ryde opened at US$3.70 apiece. According to Ryde, the proceeds from its IPO will help the company venture into new markets and invest in technological improvements. In March 2021, Ryde had planned to list on the Singapore Exchange’s Catalist board with a valuation target of $200 million. However, no prospectus was lodged.

Gold extended gains after hitting a record in the previous session as Federal Reserve Chair Jerome Powell reiterated the US central bank will likely cut interest rates this year. Bullion traded near Tuesday’s all-time high of US$2,141.79 an ounce. The precious metal has climbed almost 5 per cent over the last five sessions, and was also bolstered on Wednesday by US private payrolls data showing that companies boosted hiring in February.

Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR


RESEARCH REPORTS

Yoma Strategic Holdings Ltd – Capitalising on the new challenges

Recommendation: Not rated; Last close: S$0.046; Analyst Paul Chew

– We visited Yoma’s impressive office campus at Pun Hlang Estate in Yangon, which housed major business units such as Yoma Land, Wave Money and Yoma Fleet. The malls we visited had the usual traffic jams in the city centre. We also saw new infrastructure underway that will improve connectivity to their flagship StarCity project.

– Preparation for the preliminary works on-site in the iconic Yoma Central project in the heart of Yangon is commencing after its suspension in 2021. The project’s residential tower will be relaunched this year.

– Operating challenges in the current environment include the long delivery time to import building materials, constant power disruptions, rising inflation, and availability of foreign currency. These challenges also meant opportunities. Demand for real estate for projects such as Yoma Land with quality materials and reliable power supply jumped as households hedged rising inflation and depreciating local currency. Yoma continues to capitalise on the demand for affordable housing. Another trend is the fast adoption of digital finance, supported by the central bank.

Phillip Singapore Monthly – Feb24: A yawner this month

Analyst: Paul Chew

– The Singapore market was largely unchanged in February. Down just 0.35%. REITs took a 5% knock as expectations of a rate cut were pushed out towards the second half. The red-hot semiconductor sector was the biggest gainer. Optimism in North Asia drove up Hong Kong-related stocks.

– Economic data were generally positive. Exports jumped 17% YoY in January after almost 15 months of contraction. Tourism remains vibrant with arrival surging 54% YoY in January and RevPAR rising 13% YoY.

– Singapore REITs have a new competitor called DBS. The bank pays quarterly an annual dividend yield of around 7%, which becomes the hurdle rate for dividend-yield stocks unless they display far superior growth. Even with such a dividend yield, DBS still has untapped capital reserves of around S$7bn when the new Basel rules are implemented and another S$2bn from model overlays in provisions.

Singapore Air Transport Feb 24 – Industry-wide cost pressure

Analyst – Peggy Mak

– All three aviation-related counters fell after reporting lacklustre Dec quarter business updates. SIA’s operating profit fell 19.3% YoY; SATS’ EBIT margin of 8.8% was below the mid-teens level pre-pandemic; and SIA Engineering incurred a S$3.4mn operating loss.

– SIA passenger load factor fell for a second month in Jan 24 (Figure 1), though passenger volume surpassed pre-Covid level by 1.5% (Figure 2). Cargo volume surged 19.7% in Jan 24 (Figure 3), a combination of low base in Jan 23, pre-CNY seasonal lift, and tighter sea freight capacity caused by the Red Sea conflict. But volume has eased from Feb.

– We are UNDERWEIGHT on air transportation

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